A consortium of three financial investors, including Accel-KKR, announced it would acquire Basware via public tender.  The acquisition price is about €620 million Euros.  This price represents a premium of 94.7% over the pre-offer closing price.  Yes, you read that right, a 94.7% premium.

A Value Play

The premium looks incredible until you realize, which these savvy investors did, how far Basware’s stock had fallen.  In early December, I wrote about the correction in public procure-to-pay stocks.  At that point, Basware’s stock was down about 20% from its high.  But the stock continued to drop like a rock.  While I may have lost sight of this, the value investors did not!

Just before the tender offer, the stock was selling for €20 per share which represented a ratio of 2.3x EV/Revenue and 15.7x EBITDA.  The former multiple is insanely cheap for a profitable, scaled software company in this market–even one that is not growing!  I’m guessing the investors expect they can improve the EBITDA, which Basware has already been doing as it has transitioned to a cloud software company.

Not Basware’s First Takeover Rodeo

In late 2018, Tradeshift was in talks to buy Basware.  At the time, Basware’s largest shareholder was holding out for €669 million, but the deal never went through.  Accel-KKR is getting the company for €50 million less and, in the meantime, the company has improved its gross margin, EBITDA, and cloud transition modestly.  Still not much growth though.

This deal appears likely to go through as management and the major shareholders are on board.  From Basware’s last investor presentation, it appears Long Path and Briarwood had established stakes in the Basware as the #1 and #4 shareholders respectively.  I’m not sure at what price and when they got in, but they may have made themselves a very nice investment!

Accel-KKR has a great track record and knows businesses like this, having owned Jaggaer and Oildex to name just a couple.  It will be fun to see what they do with it.